Welcome to episode 333 of the energy talks podcast. I'm energy and climate journalist, Markham Hislop. Energy system modelers estimate that advanced economies like the United States and Canada will consume 2 to 3 times more electricity by 2050. Does this mean our power grids have to double or triple in in size? How in the world would we build all of that infrastructure in time even if we could persuade local citizens to support the effort?
Or is there a better way? Well, Nick Laws and his University of Texas at Austin coauthors recently published a paper in the Science Direct Journal arguing that expanding distributed energy resources or DERs, like rooftop solar and battery storage might reduce the strain on old power grids and save everybody money. Sounds like a smart idea, but how do we make it happen in a timely manner? How do we incentivize utilities, businesses, and individuals to invest in technologies whose benefit isn't immediately obvious to them? Welcome to Energy Talks, Nick.
Thanks. Happy to be here.
Well, I'm glad to have you. You and some of your colleagues at the University Texas at Austin are doing really good work. I've talked to, a number of them, including Josh Rhodes, about these kinds of kinds of issues. And, let's start our conversation by talking about what non wires alternatives actually are, what DERs are. I think of it as community solar, electric vehicle charging systems, demand response, microgrids. What else can you add to the list?
Yeah. I think I it's helpful to think of it also first what our wires alternatives. Right? What is the traditional upgrade? And then it's basically everything else. So the traditional response is just to maybe upgrade the lines to higher capacity lines. That's a wires alternative. Upgrade the transformers. You know, any of those components that are, you know, moving the electricity around from the generators to our homes and buildings and loads. That's the traditional, alternative.
Everything else is a nonwire alternative. So electric vehicles, right, microgrids as you mentioned, demand response, and just anything that's flexible, even smart appliances. Right? The oldest example was just literal phone calls to big plants, and the grid operator is saying, hey. We need you to shut down. We've got too much load.
I'm laughing because and I I probably should because this this was actually quite an emergency. But last year in January, the Alberta, electric system operator had to send out an emergency alert across the province to its consumers saying, please, please, please reduce your, demand because the grid's gonna fail. And within, I think, 15 minutes, they took off a lot of a lot of, megawatts of, of demand and, averted a have inverted a crisis. But really, it's just a modern version of what you exact what just what you were talking about.
Yep. The same thing has happened in in Texas and ERCOT. Right? Just sending out text messages and tweets and what have you to ask everybody to try to reduce their demand.
Now one question that just occurred to me is who owns the DER? Like, I've, I've always thought that if we're talking about, you know, micro grids and, and, demand response software systems that will enable that, that it would either be the individuals. It might be, like, let's say if we're talking about a an industrial plant or a big commercial plant, it could be the the business. In some cases, in in California, I've interviewed, I've interviewed entrepreneurs who are going out to, let's say, a business park, and they sell the the individual owners, say, look. We're gonna put in a microgrid.
We're gonna put in solar panels. We'll we'll pay for all of the, the demand response technologies, and we'll monitor it. And then out of the savings, you'll save, and we'll make our money back and make a profit. So there's all kinds of business models here. And I guess where I'm going with this is, is there any interest on behalf of the utilities in participating in this, you know, like in owning or offering it as a service?
Definitely. Yes. Some I was gonna make that point is that another ownership model is for the utility to own, the distributed, you know, energy resource, whatever it is. Although oftentimes, I think they're, restricted by regulations to either not own any at all or only have a certain percent of the their load. Right? So they may be only able to own up to, you know, 10 or 20% of generation to match their peak load.
Does that mean then that we, and by say by we, I mean, primarily, states in in the United States and provinces in Canada, need to rethink the regulatory framework in which the, you know, the grids operate?
Yes. Yeah. Totally. It's the traditional business model doesn't really incentivize service. It really incentivizes capital investments, right, and getting that return. So I think the the business model has to change, and that's one of the the first things that has to change, but it's also it takes a lot of time. Yeah.
Yeah. It's it's really astonishing to me, and it really shouldn't, but then I don't have a, you know the time that I spent spent in the, in the power industry was, a couple of summers in power industry was, a couple of summers back in the mid seventies and then my first year after high school. I grew up in a little, town in Northern Manitoba, where everybody worked for Manitoba Hydro, including my father. Town in Northern Manitoba, where everybody worked from Manitoba Hydro, including my father. And so I spent, that time, in hydro's employ, working in the, the converter station.
But whatever the hydroelectric, whatever the dam produces, it has to be converted, like, from AC to DC. I guess, AC to DC, I think. It's been a long it's been 50 years. You have to bear with me. But, anyway, the idea the idea is that it has to be converted, and that's that's where I work, but I didn't do any of this other stuff.
But I did learn a little bit about how cautious and conservative, utility cultures are. And Yeah. And and they're there. They're that way for a reason. This is not necessarily meant as a criticism because for decades, you know, the better part of, well, more than a 100 years, we have put the emphasis on, low cost and reliability.
And they really didn't have to, manage their way through the kind of technological revolution that we're seeing now, which coupled with climate policies and and other kinds of forces. I mean, this is hard on utilities to get their heads wrapped around it and then figure out how to surf this particular wave.
Yeah. Yeah. It's been like you said, for a 100 years, it's been fairly predictable. Right? Like, load has just grown with population steadily.
But most recently, load is growing unpredictably fast in certain pockets. Right? Where somebody puts in even just like, a level 2 EV charger right at their home, there's their transformer that changes the voltage level from the medium to their house level that their their all their appliances need is suddenly, you know, 200% overloaded, you know, just overnight. And the utility may or may not have, you know, had a heads up on that, but even if they did, there's we're facing incredible supply chain issues now. So transformers, for example, distribution transformers went from, you know, maybe a month or so lead time, maybe 2 months to years lead time due to the pandemic related supply chain issues.
But also in at least in the US, the average age of those transformers is about 40 years, which is really their expected life. So there a lot of utilities that are kind of behind on their maintenance already, and then somebody puts in this, you know, nice new electric stove or and or an EV charger. They're they're electrifying really quickly. And so they're, are just kind of behind, right, on all that upkeep. Yeah. We've taken this we've taken it for for granted for so long. I mean, you
know, the uptime on this, system is essentially 99% plus. Right? We we we expect it. It's almost like a right, in in our society that when you flick the the switch, the light turns on or off, but it doesn't, you know, it it the idea of outages, I know we had a well, about 3 years ago, we had an outage here for about 2 and a half days and, and it was, it was chaos. Yeah.
You know, how do you heat your home? It was, it happened in December. So it was a little chilly. And how do you heat your home? Where do you go? We had an elderly, my mother-in-law who's mid nineties at that point. You know, what do we do with her? You know, without electricity. So I can only imagine the the chaos that that utilities, must be experiencing. But let's More
people are experiencing that kind of outage. Right? Like, there is areas I know friends in California that now have, you know, backup diesel generators, you know, solar panels, batteries. They're used to several day blackouts now due to the the power system safety shutoffs they have there due to typically wildfire risk, but it's become their norm. And, you know, so people start to install install their own little microgrids that theoretically could be leveraged, right, as a grid resource, as a non wire alternative.
Although there's usually additional software and hardware beyond what they've already purchased. But that's something that the utility could get involved with, right, is to sort of, if they know they're gonna have these planned shutdowns, they can work with their customer base. Typically, they'll wanna go through a third party sort of intermediate to aggregate, right, all of those resources together so they can really use them in the best way possible. But there's there's a lot of opportunities out there, right, to operate the grid better,
you know, using those kinds of resources. Well, one of the issues that has come to the fore, I think, and we'll be seeing a lot more of it, is large customers self generating. I know, in Alberta, behind the scenes, I read a report 2, 3 years ago from the regulator and the grid operators, you know, the the the folks, if a large, let's say a paper mill says, you know what? Our electricity costs are getting out of hand. We're a big customer.
We're just going to invest in we're gonna put solar panels on every square inch of space that we can we can possibly fit them, and we're going to invest in some battery storage and all of the software, whatever else we need. And we'll just take from the grid if there's, you know, if something goes down or there's some kind of an emergency. So they essentially defect from the grid. And and and if enough of of those large customers do it, then the rest of the customers are Yep. Yes. And and
Yep. Yes.
And and I don't know frankly why more large customers don't do it. And I I think we're right on the cusp of more of of them actually doing it.
I think I think you're right. I actually in my was during my master's research, I published some on the utility dev spiral that you're referring to. That's what it's known or at least the industry term for it. But, yeah, there's a push pull. Right?
So solar is so cheap that if you've got the space to install it, whether it's on your your roof of your your paper mill, you know, or you have the acreage, then it it makes total economic sense to do it today. The problem is if you're not going to use that off grid, then the utility has a say on how much you can connect. Right? Exact and so it it they'll they'll tell you, based off of your load and as well as, you know, an engineering analysis on how much you connect, and it may be not as much as you want. Right?
And so that's what eventually will probably will lead to that grid defection. Right? Well, let's say, well, it just makes too much economic sense not to just generate our own power. The hard part, I think, is the reliability piece, though. Right?
Like, there has to they have to take that into account. So it's nice to have both the grid and your microgrid if you can. So, really, then the ideal solution is for the utilities and, you know, the people that want to invest in Doctor to really come together and find those best solutions.
One of the points I'm making, vigorously these days, especially around electric vehicles and batteries, is when you look at the S curve, if you look at historic S curves, like I, you know, I did my graduate work on the adoption of, tractors and combines a 100 years ago in Prairie Farms in Canada. The the smoothness of the s curve, disguises a lot of noise and uncertainty and bumpiness. Mhmm. And the looking back on this, the trend we're talking about, you know, 20, 30 years from now, it'll all look like a nice smooth curve and we'll go, Oh, well, you know, that was piece of cake. Right?
But of course, when you're in the midst of it, it's not at all. And but my point here is that the direction of the trajectory is clear. Unless there's some, you know, regulatory or technological roadblock that prevents all of this from happening, I think it's safe to say that that, you know, the grid defection, large customers defecting from the grid. That's the trajectory. That's my take on it anyway. What would you what would you say?
I think at least in the US, I think before there's too much grid defection that we will actually get the business model changed. So, for example, in in Australia, they have a a really high amount of rooftop solar PV adoption, and they're looking into sending real time price signals to homes and and businesses, all buildings from the distribution utility in order to incentivize the behavior they want. So instead of having to make the grid really smart by putting in lots of controls and communications that don't exist right today, instead broadcast this price signal, to effectively really aggregators of all those homes and have the aggregator handle all of the controls and communication piece so that all the utility needs to do is figure out what is that right price signal to get the behavior we need, you know, out of all those DER. So I think there'll be some grid defection. There's a lot of, like you said, interested in, just self generation, or even off grid power plants, if you will.
That's that's happening. There's people putting a lot of money and effort in that today, especially since as you we've noted solar is so cheap. Right? Like, it just makes economic sense to use it.
So Well, let me let let me rephrase then. Maybe it's not that the the arc of the curve is in that direction, but the arc of the let me rephrase again. Thinking on the fly is not not my strong suit today. It's the pressure to for the arc to bend in that direction. And then the pressure that pressure then forces utilities and regulators and customers to come up with with different approaches, and different so in Australia, it's as you say, it's it uses price signals to try to avoid that.
Yep.
And and if you think that, the US is going to adapt and and avoid grid defection in a big way, then there will be other strategies employed, in depending on the grid to do that. But the the pressure to do it created by the the low cost and ubiquitousness of the technology is really what's key here.
Yep. Yeah. They another good example of it, kind of an alternative solution, is it's called flexible interconnection. So the there's a lot of people who want to install, you know, large, solar rays, including batteries in some cases, into the distribution system. And so there's years long waiting lists, for many utilities for them to even process these applications.
Typically, what they do is look at the worst case scenario. Right? So they, you know, say, what is our highest, expected load maybe in the next 5 to 10 years? And given that, you can stall, you know, these many, kilowatts or megawatts. But the developer has already figured out they want a lot more than that.
Right? They could get make a much better, return on their investment by installing, say, 2 or 10 times the amount that the grid could even handle. So instead of doing this worst case scenario analysis, a better solution that, utilities are looking into. I don't know that this is active in the US yet. I think Europe has actually implemented it.
Maybe it goes by a slightly different name. But the utility instead says, well, we'll let you install this big solar array and connect it to our grid with the caveat that we get to curtail it sometimes when we have to, right, instead of so we will cut it down at that work during those worst case scenarios, those hot summer days or those really cold winter days.
Yeah. I can see that. And and what, an example in Alberta comes to mind of where they resit the, the, the industry. You say the utility, the regulator, and the provincial government that sets the the policy resists that change with a moratorium and then serious restrictions on the ability of distributed resources to connect to the grid. Mhmm.
And they do that in order to favor the gas power plants because the you can see the grid operators love gas power plants. This is like like the drop in replacement for a coal power plant. In fact, many of them now in Alberta are repurposed coal plants. They've just converted the the, the boilers to to, gas. Mhmm.
And the problem with that is that you're essentially protecting a legacy generator from the pressures of technological change and market change. Yes. And eventually, those pressures because the the pace of change at the global level is so rapid, eventually, it catches up to the incumbents and they get overwhelmed. And then then they're scrambling, and then things break, then they they're uncompetitive, whatever the the consequences are, but there are consequences. And I and it's never clear to the incumbents when they embark on that kind of, you know, keeping keeping the force disrupt forces of disruption at bay.
It's not clear to them what the consequences will be, but it's very unpleasant when they do arrive. And I I think I don't know, do we see any examples of that, in the US sort of analogous to what Alberta is doing?
I think, yeah, at the at the transmission scale, I think politics, you know, do end up preserving incumbents as you said. Right? Like, it's an unfortunate just product of politics. I'm an engineer. So
Say no more. We all understand. We all sympathize, Nick.
It's fine. But, yeah, it's it's it's happened in the US. We've tried to there's been political efforts to keep, you know, coal plants in the transmission system that are no longer you know, they're more expensive, and they're much dirtier than the alternatives. Right? So there's just a lose lose right there. But, due to political pressure, they've you know, people make big efforts to try to keep them in the system.
That doesn't surprise me. And and I guess, you know, this conversation, we haven't, dealt explicitly with your paper in much of it, but I think it's really important context for the kind of analysis that you did in the paper. And maybe we should get back to to that paper, and you can, describe the, the neighborhood simulation that you did and what the what you found.
Sure. Yeah. So, you know, the goal of the work was finding these win win solutions for integrating more distributed energy resources. So how can we incentivize DER investment in in the right places in the grid, at the right times that we need it as well? So, we took what's called a bilevel optimization framework that we that developed throughout my PhD research, and it accounts for those two perspectives.
So the grid operator has to account for power flows, so you need to have those power flow equations within within the model. They also have all of their costs, you know, their their their upgrade costs. So they're looking at they're we know that they're gonna have overloads in the system due to load growth. So they either have they have to choose among many options. The traditional response would be just, you know, upgrade the system, pay some big capex right now, and and, you know, just spread out our maintenance costs over the 20 years or whatever of that lifetime asset.
Or they could look at buying their own DER. As we mentioned, like, the the utility can own their own DER. A lot of utilities are looking in to putting batteries right into their substations where they could, you know, just handle those few peak hours of a year with just a large enough battery. But then they could also account for, you know, 3rd party owned DER. These aggregations that we've been talking about or a community solar system, or microgrid.
So all three of those choices are accounted within the framework, and then that prospect that second perspective is the d those 3rd party or those DER investors that wanna put in, you know, some new system and make money off of it. So this framework finds that optimal balance between how can we lower the cost for everybody that is lowering the system operation costs, which is passed along to us as consumers and their retail rate, as well as, guarantee the rate of return on the investment in that DER.
A funny little story about BC Hydro. So, in the odds, the the government at the time in British Columbia, decided that it was going to open up the generation and and take away well, not take away BC Hydro's, monopoly, but it would force BC Hydro to contract with independent power producers, most of whom, I think, were, renewable energy companies. So they did a lot of run of river. And BC Hydro, just for context, has 30, 32, big hydro dams that supplies, you know, almost all of the power in in the province. And when the current government, which is left of center, came to power in 2017, the first thing they did is commissioned this report, which was called zapped.
And it absolutely excoriated the previous government for those contracts, which as you can imagine, you know, 20 years ago, 15 years ago, were they were buying, you know, power of at 70, 80¢, a kilowatt hour. You know, it was early days for some of that, you know, for solar and wind, so you you paid more. And now that they've they've load growth has resumed, BC Hydro just released its, 10 year capital plan. Low and behold, guess what, where they're going to get all of their future generation? Independent power producers.
Yeah. And I bring this up because one of the groups that has been identified by BC Hydro is First Nations, Native Americans as as you call them down south of the border. And First Nations will kind of I don't know if they'll they'll have a first call, but they will be prominent in you know, if they bring a project to hydro, that it'll be, I suspect, prioritized because there's a big emphasis on bringing economic development to those communities. And it's kinda like community solar. Right.
It's really what it is is you have a community of 500 or a1000 or 2,000 folks up in probably in northern or remote area of British Columbia. And and they have they own, you know, that property and their their their territory, and they can put as many solar or wind turbines on it as they want, basically, and then enter into a power purchase agreement with the with Hygro. Yeah. And that seems to be this gets to the our the the, you know, our discussion of how does the utility integrate DERs into its into its power grid at hydro because it it says now that it will never build another hydro dam, it has to get 2 times power at least by 2050, and it'll go to DERs, essentially.
Yeah. Yeah. That's a great solution. I think they're going to have to look at storage as well would be my guess. Right?
Because you can imagine, like, know, for that community that puts in, a large solar array on on their land, they're going to maybe negate their load during peak sun hours in the summertime, maybe actually pushing power back, and the system may not be designed to even handle that. A lot of distribution goods have protection for against power flows in reverse direction. So there's those costs to account for, but if they could pair that with better energy storage to instead absorb that locally, you know, before it gets to the protection equipment, then they don't have to upgrade the grid. And then the community could also benefit from that storage if they, make that an islandable system. Right?
So if the grid does go down, that community could have a more, you know, resilient backup power system if they combine it with energy storage.
Let me give you another example that I've used in in, in recent episodes of our podcast because it's, I I know the one of the proponents and who's working on the project. There's a little town about 3,000 people down in the southwest corner of Alberta called Pincher Creek. And they are, it's unique, I think, because they have both, tremendous wind and solar resources. Like, if you go there, there's just, you know, giant wind turbines all over the place. They dominate the view of the Rocky Mountains that you can see from there.
But then on top of that, they also have a very big data trunk line that runs right by the community, runs right through it, right next to a highway, I'm told. And so these entrepreneurs say, look at that and go, okay. Hang on a second. Data centers with running AI are the big thing. We have a big, data trunk.
We have all the low cost clean electricity you could possibly hope for. Put the 2 together, and we're an ideal, location. And, also, we're not all that hot. Right? I mean, it's it's reasonably north, and it would be cool for much of the year.
So we're we're a great location for data centers, but instead of doing this as a grid, could we do it as a microgrid? And and can we set this up so that it's a a DER, source of power for these data centers, but still work with the grid because we need backup and just all blah blah blah, all that kind of stuff. There's lots of technical issues that need to be resolved. Right? But they're thinking of DERs not as just saving strain on the grid, but as an economic development tool.
Yeah.
What what what's your take on that?
Yeah. The the hardest thing about, you know, the these other benefits we're we're we're talking about is is quantifying. It's actually putting a dollar value on, say, backup power. Right? That's a really difficult thing to do.
So there's, for there's some straightforward examples, but, otherwise, it's really difficult. Right? Like a grocery store, for example, can say can determine how much product is wasted when the power goes out, and they can put a dollar value on that. But for a community, you know, how do you put a dollar value on your even just your hot showers or your as as Amy 11 7 7 hot showers and cold beer. Right?
Like, those are intangible, almost benefits. And then there's a lot more complicated things like even just life support machines that have to be accounted for. So it's gets in a bit of actuary science, right, of putting dollar values on these things, but that's the crux really. I think it's just it's it's putting a real value on, backup power systems or microgrids.
So given the fact that you have tried in the paper you and your coauthors have tried in the paper to quantify the benefits of the integrating the DERs into this, you know, into the into the grid, or just taking demand away, relieving the the stress of new demand, on the grid. How do is the industry beginning to grapple with the complexity of these kinds of questions? I mean, is this was your paper just a theoretical exercise that, you know, won't nobody will really take up as a challenge for another 5, 10, 20 years, or is the rapid change pace rapid pace of change, that's going on in the US, created, you know, a demand for this kind of model because they're you know, they need to cope with it in real time, and it's happening now.
Yeah. I think we're right now, we're at, like, kind of the pilot phase, I guess, I'd say, of using techniques like this. The hard thing is is that most utilities lack the, let's say even just the IT budget to look into to have just the expertise and software capabilities to to do analysis like this. Right? It is complex.
You know, it is it is hard math. So it it it's I think we're gonna see early pilot projects in the next couple years. So you're right. We probably are, like, 5 ish years away from it, becoming a more regular practice, because there it isn't like, the the methods that utilities have now for for planning are kind of entrenched. And so it's and it's a slow industry to change, but it's happening.
As an aside, Nick, for we history majors, operating a calculator is hard. Final question of the interview, and there's been some work. In fact, there was some work that came out of, University of Texas at Austin. I think your former colleague, Josh Rhodes, were worked on it. And that is the flattening of the utility business model.
The the transformation over time from the utility as a vertically integrated organization to a flat platform, if you will, that sees the trade of elect of the product, electricity, and all the services that go along with it that come as a consequence of this new, these new technologies. Is is what we've talked about today is this the early stages of the flattening of that business model and the emergence of the the DER, the trading platform? Utility is a trading platform?
Yeah. I think I I hope so. So that that's one of the, at least the trends in the US I hear a lot about all the time is that the distribution and transmission, systems need to communicate more, at least even in the planning stage. Like, that's not happening today. So, if the transmission system was aware of what, you know, we could do with these nonwires alternatives in the distribution system, we could plan, even those those megawatt plants better, right, and put in the right size systems in the right places.
Right now, you know, there's that vertical split between the two systems. So flattening would be a huge improvement, and this is a step in that direction for sure.
Just as an aside before I let you go, I was reading a paper today. Actually, it was an article in in a technical magazine, and it talked we all know the extent to which China is adopting, renewables, particularly solar. And a lot of half of the solar is rooftop. And surprise, surprise, China is also experiencing its own grid issues. There's all kinds of grid issues and all kinds of curtailment of wind and wind and solar as a consequence of not, you know, congestion and and other problems that, you're experiencing down in in the the states.
And it seems like this is gonna be a global problem, and it it seems like it's one that's not going to get resolved tomorrow. We're gonna be working on this. You know, engineers like you are gonna be working on this for many years, but we've started the process. And and I think that's that's the key thing. And I don't know how many times I've seen this, but I think it's increasingly obvious is that the the grid of 2030 or 2035 or 2040 will look very different than the grid of today.
Is it fair to say?
Yes. Definitely. Fair to say.
Well, on that note, thank you very much for this. This has been a fascinating insight into some of the practical problems that utilities and and others face in the, you know, expanding renewable generation and the role of the grid in it. And, I'll I'll, best of luck to you in your, in your new position.
Thanks. Thanks,
Marco.